http://www.chemnet.com Jun 13,2018 platts

Italian natural gas grid operator Snam is to create a joint venture company with Albania's Albgaz to help the southeast European country develop its gas market.

Signs JV contract with Albgaz to operate, maintain gas grid
Albania has limited gas demand, but TAP to change dynamics
Tirana approved Gas Master Plan in March this year

In a statement late Monday, Snam said it had signed an agreement to create the JV with shared control "aimed at providing related services for the operation and maintenance of gas pipelines in Albania."

View from the Top video -- An interview with Marco Alvera, Snam CEO

The joint venture will be 75% owned by Albgaz -- created in 2017 to develop and manage infrastructure for the Albanian gas market -- and 25% by Snam.

Albania -- which in the 1980s had gas production of up to 1 Bcm/year that was consumed mostly by the chemical fertilizer sector -- has effectively no gas demand at present and limited infrastructure.

In the power sector, 99% of Albania's power generation comes from renewables, hydro in particular, leaving the country exposed to the variability of the weather, according to industry officials.

The signing of the joint venture contract follows the conclusion of an international tender called by Albgaz to select a qualified partner to support the company.

It also follows the approval by the Albanian government in March this year of the country' Gas Master Plan -- designed to promote the fuel's use in Albania.

Gas demand in Albania could reach 1.2 Bcm/year by 2020 and 2.2 Bcm/year by 2040 if Albania moves forward with the construction of gas-fired power generation projects, industry officials believe.

The Gas Master Plan was designed to identify "anchor points" -- places where gas-fired power generation facilities can be located -- and the pipelines that need to be built to connect those points.

SOUTHERN GAS CORRIDOR

Albania is also a part of the Southern Gas Corridor to bring gas from Azerbaijan to Europe. It is on the route of the TAP pipeline that will send Azeri gas via Turkey and Greece to Italy.

First flows are expected in 2020 to Italy, though the new Italian government has said the TAP pipeline is unnecessary and has vowed to review the project even though the majority of the line in Greece is already laid.

For Snam, the deal with Albania is part of its strategy to expand throughout Europe.

Its CEO Marco Alvera told S&P Global Platts in an interview last week that Europe needs to focus on improving the interconnectivity of its gas market to help boost gas trading liquidity across the continent.

The European gas market is increasingly interconnected -- especially in the more mature markets of northwest Europe -- but some areas remain poorly served, especially in southeast Europe.

"The agreement is one of several activities launched by Snam aimed to leverage Snam's long-established experience in market development and the construction and management of gas infrastructure in Italy and Europe as well as making it available to other operators at a global level," Snam said.